If you are overwhelmed with taxes and struggling to pay off your tax debt, you may be able to use Form 656 to negotiate a payment plan or offer in compromise with the Internal Revenue Service (IRS). Form 656 is a legal document that allows taxpayers to propose a plan for paying off their tax debt, or to offer a settlement for a reduced amount.
Using Form 656 can be a helpful option for taxpayers who are unable to pay their full tax debt in one lump sum. It allows you to negotiate a payment plan that works for your financial situation, and can help you avoid the consequences of not paying your taxes, such as tax liens or wage garnishment.
To use Form 656, you will need to complete the form and submit it to the IRS along with any required documentation, such as financial statements or proof of income. You will also need to pay a non-refundable application fee, which is currently $205 for most taxpayers.
There are two main options for using Form 656: negotiating a payment plan, or offering a settlement for a reduced amount.
Negotiating a payment plan:
If you are unable to pay your full tax debt in one lump sum, you can use Form 656 to negotiate a payment plan with the IRS. This can be a good option if you are able to make regular payments towards your tax debt, but need more time to pay off the full amount. When negotiating a payment plan, you will need to propose a plan that outlines how much you can afford to pay each month, and how long it will take you to pay off your debt. It’s important to be realistic when proposing a payment plan, as the IRS will review your financial situation and determine if your plan is feasible.
Offering a settlement for a reduced amount:
If you are unable to pay your full tax debt and do not believe you will be able to pay it off through a payment plan, you may be able to offer a settlement for a reduced amount using Form 656. This is known as an “offer in compromise.” To qualify for an offer in compromise, you must demonstrate that you are unable to pay your full tax debt, and that the amount you are offering is the most you can reasonably afford to pay. The IRS will review your financial situation and determine if your offer is acceptable. If it is, you will need to pay the agreed upon amount to the IRS, and your tax debt will be considered paid in full.
Final Thoughts
It’s important to note that Form 656 is not a guarantee that your payment plan or offer in compromise will be accepted by the IRS. The IRS will review your financial situation and determine if your proposal is feasible and acceptable. If your proposal is not accepted, you may need to come up with an alternative plan for paying off your tax debt.
Using Form 656 can be a helpful option for taxpayers who are overwhelmed with taxes and struggling to pay off their debt. It allows you to negotiate a payment plan or offer a settlement for a reduced amount, and can help you avoid the consequences of not paying your taxes. If you are considering using Form 656, it’s a good idea to consult with a tax professional or attorney to help you understand your options and increase the chances of your proposal being accepted by the IRS.
